re on the horizon that promise to ease the path to a more competitive and consumer-oriented China. The merging of Hong Kong into the Chinese economy will be followed closely by a Communist Party Congress. Leadership within the congress will be chiefly concerned with "trans-century" tasks, which include capital works and infrastructure projects totaling up to $1,000 billion (Walker, 1996a, 1).
At this point, reform of the state sector seems paramount. The World Bank in a recent report pointed out that the economic gains that China has enjoyed since 1978 are largely a result of increased efficiency brought about in the state run economic center. To reap the rewards of changes already made and to capitalize on China's growing commercial market the World Bank suggested other changes. First, there needs to be greater reliance on market forces with an emphasis on state enterprises and the financial sector. Second, restore the health of government finances by raising government revenue as a share of GDP and shifting the focus of government expenditure policy toward such areas as health, education, poverty reduction, infrastructure development and environmental protection ("The Chinese economy," 1996). Chinese authorities seem to be heeding the advice of outsiders and are creating change, along with consistent economic returns. Supervision of commercial banks is being strengthened, new banks are being established to compete with existing institutions, open market operations are being introduced and efforts are being made to deal with the non-performing loans of state enterprises. In 1994 separation was achieved for policy loans from commercial transactions by establishing banks exclusively devoted to policy lending. Another important step was the establishment of a banking law forbidding any individual from interfering in bank lending. This measure was aimed at powerful local officials who in the past bullied banks into lending to ...